Family control, leverage, and quality of earnings: a study on manufacturing companies in Indonesia

Earnings quality can be influenced by family control through entrenchment effect and alignment effect. This study examines family control in improving earnings quality and leverage in moderating family control on earnings quality - the quantitative descriptive research method used as a research method. Manufacturing enterprises registered on the Indonesia Stock Exchange for 2017 and 2018 make up the research population. The data in this study are unbalanced. Secondary data was gathered from annual reports, prospectus reports, the Indonesian Capital Market Directory, and other sources for this study. The research topic is determined by applying the definition of a family business. The variables in this study include abnormal cash flows, abnormal production costs and, abnormal discretionary costs. They were testing the hypothesis using regression analysis (Ordinary Least Square/OLS). The results showed that family control did not affect real earnings management. This shows that strong family control does not affect earnings quality. The leverage variable only moderates the effect of family control on abnormal cash flow from operations (REMCFO).